Personal Finance
What to know about Harris’ affordable housing economic proposals
Democratic U.S. presidential candidate, Vice President Kamala Harris, speaks at an Aug. 10 campaign rally in Las Vegas.
Justin Sullivan | Getty Images News | Getty Images
Supply is housing policy’s ‘bipartisan sweet spot’
“The bipartisan sweet spot around the housing affordability challenges that we have today is on increasing supply,” said Dennis Shea, executive director of the Bipartisan Policy Center’s J. Ronald Terwilliger Center for Housing Policy.
Ever since the foreclosure crisis, a major period of property seizures in the U.S. between 2007 and 2010, there have been far fewer new single-family homes and multi-family rental buildings under construction, said Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, a non-profit think tank in Washington, D.C.
There’s “a more acute shortfall” when it comes to affordable homes, she said, whether for renters looking for quality rental units or first-time buyers looking for their first home.
To get to those 3 million new units, a Harris-Walz administration would introduce a “first-ever tax incentive” for home builders who build starter homes sold to first-time homebuyers, according to the proposals unveiled last week.
The initiative would complement the Neighborhood Homes Tax Credit, according to the announcement. A bill pending in Congress called the Neighborhood Home Investment Act, which would promote the creation and rehab of starter homes for sale in distressed communities, would create that tax credit, said Shea.
“It would create this tax credit, and that has strong bipartisan support,” he said.
My conclusion is that [Harris’] housing plan would be worse than doing nothing.
Edward Pinto
senior fellow and codirector of the American Enterprise Institute’s Housing Center
Former President Donald Trump has also talked about ways to increase housing supply as part of his presidential campaign proposals.
“We’re going to open up tracks of federal land for housing construction,” Trump said in an Aug. 15 press conference. “We desperately need housing for people who can’t afford what’s going on now.”
But Edward Pinto, senior fellow and codirector of the American Enterprise Institute’s Housing Center, said it’s “much, much harder” for the government to pass “supply-side proposals,” compared to efforts that generate demand by making homebuying easier for consumers.
“My conclusion is that [Harris’] housing plan would be worse than doing nothing,” he said.
‘It’s hard to define what a starter home is’
It will be important for Harris to clarify what she means by “starter home,” said James Tobin, CEO of the National Association of Home Builders.
“It’s hard to define what a starter home is,” said Tobin, as underlying costs make it hard to keep building expenses low.
“In most markets in the country, it’s hard to build to that first-time home buyer because of labor costs, land costs, borrowing costs for a builder, and then material cost,” he said.
Defining a range of price points for a starter home will also be important, as it may vary widely across different markets, said Tobin.
“In California, a starter home might cost seven or $800,000, but in the South … it might only be $250,000 or $300,000,” he said.
The $40 billion innovation fund seems ‘very high’
The list of Harris’ proposals also includes a $40 billion innovation fund. The money would empower local governments to fund local solutions to build housing, as well as support local solutions to build housing.
Yet some experts are skeptical it will fulfill the intended goal.
“The federal government doesn’t have a whole lot of authority over what happens at the local level,” said Fairweather. “It’s up to the local planning commissions whether they’re going to allow for more housing in order to get that [innovation fund] money.”
“But time and time again, locals and local governments, local homeowners ignore incentives because they’re so resistant to building more housing,” said Fairweather.
Additionally, the $40 billion housing innovation fund may be too high of a cost, making it unlikely to receive bipartisan support, said Shea: “I don’t know if the market could bear that price tag in Congress.”
Aid for first-time home buyers has less support
Harris hopes to provide $25,000 down-payment assistance to first-time homebuyers who have paid rent on time for two years, with more generous support for qualifying first-generation homeowners.
The proposal stems from an idea the Biden-Harris administration presented earlier this year, which called on Congress to implement $25,000 in down-payment assistance exclusively for 400,000 first-generation buyers (or first-time buyers whose parents weren’t homeowners) and a $10,000 tax credit for first-time buyers.
Harris’ blueprint would apply to all first-time buyers and broaden the reach to more than 4 million qualifying applicants over four years.
But “there’s just not a lot of bipartisan support,” said Shea.
During an Aug. 16 appearance on Fox Business, Sen. Tim Scott, R-S.C., said Harris’ $25,000 down payment assistance “will only make the demand higher with the supply not moving, which means that prices will go up, fewer people are going to be able to afford it.”
“And frankly, unless they’re going to embed financial literacy in any program, it only means there will be a higher level of default,” said Scott.
To help renters, Harris addressed two pending pieces of legislation. The Democratic presidential nominee called on Congress to pass the Stop Predatory Investing Act, a bill that calls for removing key tax benefits for those who own 50 or more single family properties. This initiative would curtail major investors from buying up large sums of single-family rental homes.
Meanwhile, the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act would crack down on companies who use tools to fix market rent prices.
A trader wears a Trump hat as he works on the floor of the New York Stock Exchange during the opening bell on Nov. 6, 2024.
Timothy A. Clary | Afp | Getty Images
On Nov. 5, the presidential election handed a decisive victory for President-elect Donald Trump. In the days that followed, the markets soared.
A “Trump trade” led to new index highs for the S&P 500 and Dow Jones Industrial Average, lifted with the help of certain sectors expected to do well under the president-elect’s second term.
As of Monday, the postelection market fervor had started to subside to preelection levels.
Yet, some experts say they are seeing a renewal of so-called animal spirits.
“Animal spirits” is a term first coined by economist John Maynard Keynes and refers to the tendency for human emotion to drive investment gains and losses.
Some experts say animal spirits are a sign of consumer confidence. However, the phenomenon can also be trouble for investors if they take on “excessive risk,” said Brad Klontz, a psychologist and certified financial planner.
“It’s essentially why dead investors outperform living investors, because dead investors are not impacted by their animal spirits,” Klontz said.
Research has shown dead investors’ portfolios tend to outperform, since they are left untouched because they are less likely to be influenced by emotional decisions, such as panic selling or buying.
Investors may be excited or fearful
The recent market runup was not prompted by individual investors chasing the market to a meaningful extent, according to Scott Wren, senior global market strategist at Wells Fargo. Individuals, who were split in their election choices, are also divided in their investment outlook, he said.
“Depending on who your candidate was, you may be excited about the future or fearing the future,” Wren said.
Instead, it has been professional traders and money managers — who couldn’t sit on cash when the S&P 500 index was setting new records every two or three days — who have helped drive the markets higher, he said.
There is also big-picture excitement going into 2025, according to Wren, with expectations for lower taxes, less regulation and reasonable levels of inflation. However, the U.S. economy might have a couple of quarters of slower growth in 2025, he said.
“We’re not going to have a recession,” Wren said. “We think that’s very unlikely.”
‘Nobody is immune’ to investing missteps
Ideally, investors ought to sell stocks when they are priced high and buy when they are low.
But research consistently finds the opposite tends to happen.
Humans are wired to take on a herd mentality and follow the crowd, which guides our decision-making on everything from who we vote for to how we invest, according to Klontz.
“The first thing is to just recognize that nobody is immune from this,” Klontz said.
Now is the perfect time for investors to make sure they have an asset allocation that is appropriate to their personal risk tolerance and financial goals, he said.
“It’s harder to do when the market’s crashed,” Klontz said.
Additionally, it is important to keep in mind that financial advisors, like all humans, are also susceptible to biases. When seeking financial advice, investors should ask questions such as “What would you do as my advisor if the market went down 50%?” Klontz said.
Good advisors should have systems in place to keep them from making big mistakes, Klontz said. They may have an investment committee or a predetermined approach for how they will act.
Importantly, investors should also be asking themselves the same question, Klontz said. For example, if the market drops 40%, are you OK with your portfolio dropping from $100,000 to $60,000?
“If the answer is no, then you probably shouldn’t be all in stocks,” Klontz said.
However, if you are young enough, a big market drop could be an important opportunity to dollar cost average — or invest a fixed amount of money on a regular basis — and position your money for larger gains when it recovers.
“Most people have a real tough time doing that, which is why advisors can help,” provided they are familiar with behavioral tendencies, Klontz said.
If you still haven’t booked your holiday travel plans, take note: Prices tend to rise the closer you get to the days you’re looking to travel.
To afford holiday trips, about 50% of respondents are cutting back on other expenses while 49% are picking up discounts and deals, according to the 2024 Holiday Travel Outlook by Hopper, a travel site.
Some last-minute holiday travelers are leaning into so-called “Travel Tuesday” — or the Tuesday after Cyber Monday and Black Friday — which falls on Dec. 3 this year.
Search interest for Travel Tuesday rose more than 500% from 2021 to 2023, according to a recent report by McKinsey and Company.
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There’s a reason why shoppers are searching for the term.
Last year, 83% more deals were offered on Travel Tuesday versus Cyber Monday and 92% more than Black Friday, according to Hopper data.
Yet, there may be some limitations on the deals available, experts say.
“The challenge for a lot of people is, ‘Do I wait?'” said Sally French, a travel expert at NerdWallet.
For travelers who are set on specific days and places to visit, the answer might be “no.”
“While airlines and online travel agencies are going to offer flight deals on Travel Tuesday, there is no reason to wait,” said Phil Dengler, co-founder of The Vacationer, a travel platform.
How much you benefit from potential discounts on Travel Tuesday will depend on your flexibility, experts say.
“If you have zero flexibility,” said Hayley Berg, economist at Hopper, then “if you see a good deal before Travel Deal Tuesday, feel free to book it.”
How Travel Tuesday works
People wait in line for security checkpoints ahead of the Thanksgiving holiday at O’Hare International Airport in Chicago, Illinois, U.S. November 22, 2023.
Vincent Alban | Reuters
Similar to Black Friday and Cyber Monday sales, Travel Tuesday deals sometimes begin to roll out before the day itself, said Dengler. They might even stretch into the day after.
Nonetheless, you will typically need to book the flight, hotel stay or cruise trip by the end of the day in order to reap the benefits, he said.
As you shop, make sure to read the fine print in case discounts only apply for certain routes and days, Dengler explained.
Retailers often have a limited stock for Black Friday and Cyber Monday doorbusters. With Travel Tuesday, there may be a limited number of airline seats or hotel rooms, NerdWallet’s French said.
“They’re not going to fly two planes on the same route at the same time,” she said.
‘Be ready’ to book
Travel Tuesday might be better suited for deciding when and where you’ll go for an upcoming vacation in 2025, versus a very specific itinerary home over the holidays.
If you are not flexible on the days and destinations you plan to travel to and you find a flight available at a price you’re comfortable with, “book that trip right now,” French said.
“If you wait until Travel Tuesday, then that deal could be gone,” she said. “You don’t want to wait for Travel Tuesday for it to be sold out.”
In some cases, it doesn’t hurt to book ahead and keep browsing for potential price drops, experts say.
You typically have 24 hours from booking to cancel for a full refund as long, as it’s seven days before a flight’s scheduled departure time, Dengler said. Plus, some airlines don’t have change fees for non-basic economy fares, he said.
If those terms are in your favor, “if you see a better deal on Travel Tuesday, simply cancel your current bookings and book the Travel Tuesday offer,” Dengler said.
On the flip side, if you’re less tied to specific dates and places, but have a general sense of where and when you want to travel, then holding off until discount days may be worthwhile.
“We tend to see the deals do get better and better the closer we are to actual Black Friday or actual Travel Tuesday,” French said.
The biggest takeaway for travelers is to start thinking about what you might want to book, Berg said.
“I really encourage travelers to do that exploration now so that on Travel Deal Tuesday, they can be ready to actually book,” she said.
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